Strategic Analysis of Mercedes Benz

Executive Summary
One of the most appreciated and innovative business sectors in the global market is the Automobile
industry. There is increase competition in the automobile sector in the luxury segment in the recent years.
The Japanese car makers have also come up with many luxury cars to compete with the European car
manufacturers like Mercedes Benz, BMW, Audi etc. Toyota and Nissan are coming up with luxury cars
not only in the Asian markets. The Japanese car makers have a strategy to establish themselves in the
European and US markets.
The purpose of the paper is to critically analyze Daimler Benz by using the TOWS matrix and to develop
strategies that integrate various strengths, weaknesses, threats and opportunities. One interesting question
is how European carmakers will respond to the Japanese threat.
Daimler Benz is known for engineering excellence and is facing fierce competition from other luxury car
manufacturers. It has also been undergoing critical changes to adjust itself to the present global scenario.
It is also trying to enter into the aerospace and electronic gear markets. However the amin focus will be
on the automobile business. Strategic planning model is also made use of TOWS matrix is used for
suggesting alternative strategies that are needed to be implemented by Daimler Benz to become
sustainable in the future.

Introduction

Automobile industry has evolved continuously over a period of years from the 18th century. It has moved
from craft production to mass production and then to lean production. It has been a leader in terms of
manufacturing and providing employment to the masses. The global automobile industry is dominated by
Europe, US, Japan, China and India. These countries have a significant influence on economic
development, FDI and other policies. The automobile market has been dominated by German car makers
for many years. But the recent raw material price hikes and high labor costs are making the car makers to
shift from Germany and diversify into other regions. EU accounts for around 25% of the world
automobile production. UK is the EU region. The domestic demand in UK is increasing the rate of 25-3 .
US is the largest automobile manufacturers in the world with the big car manufacturers as Ford, General
Motors and Daimler. Toyota Motors is also one of the best car manufacturers in the world known for its
quality. US is losing out to the Japanese car makers in the recent times. In this paper, Indian automobile
industry (which is similar to the overall global auto industry) is dealt with in detail and strategies are
suggested for Mercedes Benz to excel in the future not only in the Indian and asian Markets but also in
other parts of the world.
Automobile industry is one of the fastest growing industries in India clocking a growth rate of around 1
(2010). After the 1991 reforms, the automobile sector has grown spectacularly at a rate of around 17% for
the last few years. Around 17 Million automobiles are manufactured every year in India and nearly 2.3
million are exported. India is the 7th largest passenger car and commercial vehicle manufacturing industry
in the world, with an annual production of more than 3.6 Million units (2010). India is also the 4th largest
car exporter after Japan, South Korea and Thailand. The turnover from the industry are around USD 35
Billion. Passenger car segment accounts for around 10.22% of the total vehicles produced (2010 figures).
There is sustained growth and increased competition in the sector in the recent times.
The demand for automobiles in India is based on the following factors
1.
2.
3.
4.
5.

Vehicle Prices : depends on the wages, material and operational costs

Exchange rates : Determines the price of import of automobiles for consumption in India
Preference for a particular type of Automobile : Consumer Behavior
Running costs : cost of running the vehicle; Fuel and maintenance costs
Income : Affordability in terms of the income they earn

Demographic Analysis
The following are the demographic factors which should be taken into consideration while analyzing the
Automotive sector.
a. Population growth of India : India stands second in terms of the number of people in a country
after China. Research reports state that India will be the most populous country in the world by
2025. More than 5 of the population is below 25 years and 65% is below 35. By 2020, the
average age of the India will be around 29. Population is growing at the rate of 1.4%.
b. Rural Urban ratio : Around 72% of the population is based out of rural areas. But a greater
proportion of the population is shifting to the urban areas from the rural areas.

c. The population age mix is as follows. 014 years age group is around 30.8% of the total
population, 1564 years age group is around 64.3% of the total population, 65+ age group forms
around 4.9% of the total population.
d. Literacy Levels : Indian literacy rate is around 74.04% according to the 2011 estimates. Effective
literacy rates for men and women are 82.14% and 65.46%.
e. Changing Income levels : There has been a rapid rise in the income levels after the 1991 reforms.
Also the distribution of income has changed significantly.
f. Changing Family Structure : The family is one of the main elements which influences an
individual in terms of development. As India is growing, there has been a change in the structure
of the family. Small nuclear families are the trend rather and large joint families

Economic Analysis :
Automotive sector has been facing a difficult time since the past one year. The industry is slowing down
because of slow down in the economy due to recession, increase in fuel prices, exchange rate effects etc.
The contribution of automobile industry to GDP of India has been very significant. India has become a
significant player in the global automobile manufacturing nations. Passenger car segment grew at the rate
of around 13% (2010 estimates) although it has gone down recently. Maruti Udyog is the largest
manufacturer of cars in India with a market share of close to 46%.
Recession
All the major automotive majors had a healthy growth till 2008. Then there has beena slowdown due to
the recession. Global recession had an adverse effect on the automobile industry in 2008. Although India
is a very strong and regulated economy, the impact of the recession is still continuing on the economy.
Sales of passenger vehicles fell by over 13.86% during December 2008 compared to December 2007. The
growth of two wheelers from April to December 2008 is around 1.85 % which is very minor.However the
overall production of passenger vehicles, commercial vehicles, two wheelers and three wheelers has
increased to 11.17 Million from 10.85 Million, the previous year. There was a marginal increase in the
number of passenger vehicles from 1.77 Mn to 1.83 Mn While two-wheelers has registerd an increase
from 8.02 to 8.41 million. 9.72 million as compared to 9.65 million were the total number of vehicles sold
in 2008 compared to 2007.

Foreign Investments
Indian automobile industry has also been contributing to the GDP in terms of the cross border M&A deals
taking place. A number of M&A deals are still on hold because of the mismatch in prices quoted by the
seller and the buyer . Buyers fear that the valuations are too high even in the period of recession and
might fall further after the deal is done while the sellers feel that it may rise after they are done with the
deal. The sector saw M&A deals worth around 30 billion USD last year although the overall transaction
value in 2009 was nearly 40 Billion USD. Also the number of deals came down from 532 to 521.
Some of the recent transactions which had taken place in the last 2-3 years are

1. Tata bought the Jaguar and Land rover from Ford for 1.5 Billion Pounds in 2008.
2. Mahindra and Mahindra acquired 7 of Ssangyong motors for $463 Million in January 2011.
3. Tata Motors has opened a new plant in South Africa at an estimated cost of 16.5 Million USD.
Inflation
Inflation in India is hovering at around 8.5% which is quite high. Inflation rate is the general rise in
prices. Inflation brings around a negative effect on sales of the car market. The industry comes to a
standstill when the inflation rises to an extent not supported by the economy. The effect of inflation is
mainly associated with the manufacturing and production of cars in the country because of the price
hikes. The automobile industrys growth has slowed down due to the rate hikes in steel and fuel.Inflation
has hindered the growth of the Automobile sector in a very significant way because of its effects on the
manufacturing which mainly involves steel and other raw materials.
There wasnt much effect on the Indian automobile industry during the last year even thought the crude
oil prices have increased drastically to around $130 per barrel. Two major factors which affect the
automobile sector are oil price hike and higher interest rates. But these factors didnt influence the sales
very much during the last few years..However inflation is one factor which affects almost every sector
and Automobile sector is no different. The fuel price hikes and inflation have led to a decrease in sales of
the vehicles. There has been a hike in the prices of automobiles by 3-4% to meet the rise in prices of raw
materials. There has been a fall in the car industry by around 8% because of the price hikes.
FDI
10 FDI has been allowed under the automatic route to the automobile sector. The turnovers are around 12
Billion USD and 3 Billion USD in the automobile and auto components segments. There is a cost
advantage w.r.t manufacturing activities and labor in India compared to its western counterparts.
Manufacturing costs are lower by 20-3 in India. FDI inflows have been increasing right from the
economic liberalization reforms.
Foreign Exchange
After China and Russia India holds the largest stock of reserves. The composition of balance of payments
and liquidity risks has changed significantly over the past few years because of different types of flows
and other requirements. This can clearly be seen in the FOREX policy India.
Indias foreign exchange reserves grew at a fairly good rate and is consistent with the growth of the
economy and the foreign investments Also it is in line with the capital flows ahicha re risk adjusted and
the share of foreign investments.
Exports
Indias exports in the automobile sector have grown significantly over the past few years. It has reached a
figure of $ 4.5 Billion. Uk is the country from which maximum revenues come due to export of vehicles.
Indias exports are estimated to cross 12 Billion USD by 2014.
The main factors which led to expansion of manufacturing facilities of several automobile majors are
1. Strong engineering expertise
2. Low-cost

3. Manufacturing of fuel-efficient cars

In the past few years, India has established itself as a centre for manufacture of small carsThe biggest
exporter from the country is Hyndai Motors which exports nearly 250000 cars. Maruti Suzuki also
exports a large number of cars to Suzuki motors in Japan and Nissan motors in Europe. Nissan also
started exporting cars manufactured in India. Tata Motors supplies vehicles to Asian and African markets
and is trying to enter into the European automobile sector. It is also planning to launch its Nano into
European market with an electric version. Mahindra and Mahindra is also trying to launch trucks and
other commercial vehicles business in the US market. Bajaj Auto is working with Renault to launch a
low cost car. Although there are quite a number of possibilities, there are challenges also which have to be
handled by the car companies to ensure they are not affected adversely.
Technology
Every industry is affected by the advent of the Internet. Automobile industry is no different and is
affected by the internet. A research report shows that nearly 65% of the potential buyers do secondary
research by searching about the products they are going to purchase over the internet. Out of these 65%,
around 9 actually went to the auto websites before a test drive. B2B marketing has become a very
important phenomenon in the recent times and the auto industry is utilizing this by providing more and
more information on the internet. This also leads to reduction of costs of advertising and more efficiency.
Ford, GM, and Daimler had created a global online exchange for suppliers and manufacturers of original
equipment which was called Convisint. They also started using a tool called Quote Manager to send
request for quotes to suppliers through Covisint.
Automobile companies also started to develop alternate fuel vehicles keeping in mind the concerns
regarding global warming. Although the costs of developing the new technology for alternate fuel cars are
very high, new legislations forced the cars to look into this segment. Electric cars are being developed by
the car companies because they are relatively cheaper compared to solar and other kind of technology
based cars. These models were also not very popular because of slow speeds and low performance.
Toyota and Honda began to develop new electric vehicles on retail scale from 2001.
Global
Alliance of Automobile manufacturers was created by the General Motors, Ford Motor Company,
Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Company as a new
trade association which replaced the American Automobile Manufacturers Association in 2004. Their
goals were to work together on policy matters which are of public interest, to provide quality data which
is credible and set benchmark standards . There was also a trend of merging in the 1990s. American
firms had bought many foreign car companies and there were a large number of takeovers. In 1998,
Daimler Chrysler was formed with the merger of Daimler and Chrysler although they discontinued their
merger recently. Ford-Volvo and GM-Saab are other well known big mergers.
Sociocultural
Today people perceive the personality by the car one drives. Even though many people do not admit it,
this is very much true. Manufacturers are aware of these facts and are trying to cash upon this issue by
targeting these markets and ideas. Anyone who drives a Mercedes or BMW or Audi is assumed to be

wealthy because of the price of these vehicles. Similarly anyone driving a SUV is perceived to be very
sporty. No one wants to be perceived as someone driving a junk item. They are worried about how the
society looks at them. Also they feel better when they drive a vehicle of their choice.
Some people are environmentally conscious and so want to drive only fuel efficient cars. Companies are
also trying to successfully establish cars with alternate fuels to target these segments. Also they are trying
to promote green thinking among the other customers who go for gas guzzling cars.

Porters five Forces for the Automotive Industry

Threat of New Entrants

Automobile industry is in a very developed phase right now and so it is very difficult to enter into this
segment now. Hence the threat of new entrants is low. Also there is economies of scale and achieving
economies of scale for a new entrant is very difficult. There is a huge amount of capital which needs to be
tied up to achieve economies of scale. Mass production is the only way by which a company can achieve
economies of scale. A large amount of capital is also needed for the research and development as
companies need to innovate frequently to have a sustainable strategy. Distribution is another barrier entry
as dealerships are very limited and a dealer cannot deal with multiple brands of cars.
Bargaining Power of Suppliers
Since there are a large number of suppliers in the automotive industry, their power is very limited and
cant exert pressure on the car manufacturers. Manufacturers have the power to switch to other suppliers
whenever a particular supplier is not conforming to the demands of the car manufacturers. So the car
manufacturers have an advantage over the suppliers in terms of exerting pressure over one another.
Bargaining Power of Buyers
Buyers have significant amount of power in the automobile industry. The car manufacturers rely on the
buyers to consume their products. It is from the buyers that the car manufacturers get their revenues from.
So, if the buyers are not happy with the car designed by the company or any other policy of the company,
they just switch to another companys car which is detrimental to the survival of the company. Buyers do
not have complete power because the possibility to integrate backward and enter into the car
manufacturing segment is very low

Threat of Substitute Products

Threat of substitutes is also quite low because of fewer substitute products. Mass transportation systems
like trains, metro buses etc. are the main threats although they do not pose a massive threat to the car
manufacturers. Threat of substitute products vary from geography to geography. A place where the metro
or mass transportation systems are very well developed see a very high threat of substitute products while
in other places there is no such issue.

Intensity of Rivalry among Competitors

Competition is very high in the automobile sector. There are quite a number of companies competing for
the market share. Also they are all almost equal in terms of capabilities to develop highly efficient cars.
There is not much differentiation involved in this sector. If there are differentiated products, that increases
the cost of manufacturing which is not feasible for long term sustenance.
Also consumers do an in depth research about the car they are going to purchase. They keep track of
various companies offering cars similar to their needs. So it is very important for car manufacturers to
keep track of their competitors on a regular basis. Also advertising plays a very important role in
influencing consumers buying decisions.
Competitor Analysis
Competitor Analysis
Toyota Motor Corporation SWOT Analysis
Toyota motor corporation which is one of the industry leaders in the automobile industry was
incorporated in 1937. Being a very old company it has many strengths. The major brands of Toyota are
Lexus, Toyot and Scion. Through these brands it reaches many sectors of the market. It has been the most
preferred vehicle for many customers for many years. Toyota targets specific regions of the world based
on the consumer profile and the costs involved. It has also been a leader in Total Quality Management.
The Japanese word kaizen had emerged from Toyotas way of continuous improvement. Toyota also
came up with a hybrid car Prius in 2003. Ever increasing fuel prices is a major driver for Toyota to enter
into these segments.
Some of the features of Toyota which are considered as weaknesses are that the brand is not considered to
be prestigious. Although it is one of the top companies in terms of sales its performance in terms of
paying dividends and stock performance is not up to the mark. Although Lexus brands sales are quite
good in general, the sales are quite low compared to BMW in the global scenario in Europe because of the
lack of the diesel version of the Lexus. Also since there are subsidies on diesel in some European
countries, its sales are lower.
There are a huge number of opportunities for Toyota. Toyota is the second largest auto manufacturer in
the world after GM. It gave a fight to GM in replacing it as the top automobile manufacturer in January
although GM fought back and replaced Toyota in august 2011. Toyota has also made significant changes
in the product line to suit the customers in the US better since a majority of its sales come from the US. It
has also entered in to the hybrid car segment to offer its products to the eco crazy sections of the society.
It has also got money to spend on R&D to enter new segments and improve up on the existing product
line. Also the opening up of markets in the EU nations is a very significant opportunity for Toyota to put
their luxury line in this market in competition to BMW and Mercedes Benz. It is also trying to launch
pick up trucks into the US market in competition to Ford and GM.
In terms of competition, main threat to Toyota is Hyundai. Hyundai provides better products in terms of
higher horse power and less costs compared to Toyota in the same segment. In the luxury segment,
BMW is still number one and Toyota is far off from BMW. Technology is a major driver for sales of
automobiles and Toyota has to try to keep up its technology to sustain in the longer term otherwise it

would lose its market share in the next few years. The latest trend is the hybrid vehicles. Toyota is
competing with Honda in this particular segment. Gm and Daimler Chrysler have also been trying to
come up with hybrid cars. Thios would become an opportunity if Toyota can gain market share before the
other big competitors. Toyota has also drastically changed the way they manufacture cars to reduce costs
further. They are trying to create a new manufacturing strategy which is more flexible than the earlier
systems. More customized cars will be made in the hybrid car segment and the new plants which will be
set up will save around 1 Billion dollars.
Toyota can also be very badly impacted incase the hybrid car category fails to impress the customers in
the coming few years. They may lose their credibility in designing high quality high performance cars
among the customers.
Honda Motor Company SWOT Analysis
Honda Motors started its journey as a motor cycle manufacturer initially and then entered into the car
manufacturing. Later on it became one of the most dominant car manufacturers in Japan and also in the
world. The quality of products manufactured by Honda is unparalleled. It is very well known for its high
quality products all over the world. They are also the largest manufacturers of motor cycles in the world.
It has won many awards for maintaining excellent quality standards in its products as well as in its plants.
Hondas cars are generally high on performance and very fuel efficient compared to other automobiles. It
is also one of the most innovative companies and designs robots and motor sports programs that are
advertised to the consumers to gain their loyalty. Honda has also won the motosports GP manufacturers
title and is second in the F1 constructors championship.
Honda, since it operates on the F1 races and other circuits and races, it can better design its products
because of the fact that it experiences all kinds of situations during these races. They were also pioneers
in low emission internal combustion engines. They also came up with the hybrid vehicle concept and are
leaders in the field. It is one of the very few manufacturers who have ventured into segments other than
the car manufacturing.
Honda also has weaknesses. Its products are very routine and are bad in terms of styling. The prices are
also higher in the non luxury segment compared to cars of other manufacturers. They are also considered
to be underpowered. The opportunities consist of expanding into the truck business and compete with
other manufacturers. It can also progress into the low emission car segment and alternative fuel
technology to gain competitive advantage in the future. Although they are trying to enter into the
alternative fuel segment, their technology is relatively highly priced which might be a deterrent for its
success in the future. Also infrastructural problems still exist. Expanding into China and India is another
very big opportunity for Honda as these markets are huge and the GDP growth rates are higher. Also the
disposable income is increasing in these nations which stands as an advantage for Honda. Hondas
success has been imitated by many of its competitors which makes Honda stand on par with its
competitors and not in an advantageous position. This is not a very good situation for Honda to be in as
other competitors catching up means Honda going down.
Honda has mainly focused on creating value through sales and innovation and expenditure in R&D.
Honda believes in having plants in locations where the product is being sold. Hence manufacturing plants

are established in areas where sales increase. This is the reason why Honda has 100 manufacturing plants
in 30 countries. It is also focused on environment and can be seen in its initiatives of low emissions
vehicles and manufacturing plants which are eco friendly.
Honda is also trying to come up with the truck business. It would in fact be better if they come up with a
different styling altogether as it will differentiate its product from other established products. R&D
spending should also be increased to come up with more innovative products which can compete with
other competitors. Its diversification strategy should also be continued so that it doesnt face risk of
failure of a particular product which will affect the entire company. It should also try to expand into
China and India and try to increase production these regions. As for the new low emission vehicles, some
new products should be introduced into the market to establish itself as a market leader. It came up with
the Accord to fill up the gaps but it wasnt enough. More and more new products have to be brought
about in the market to make sure that it has an advantage over other players in the market
The expansion strategy of Honda might put it in a very advantageous position in terms of market share
and also revenues in the emerging markets. If they are able to put affordable cars into these markets, it
will spread the image of Honda in these markets.
Ford SWOT Analysis
Ford is one of the oldest automobile manufacturers in the world. It has two businesses the automobile
business and the financial services business. The automotive business mainly deals with the designand
development of cars and trucks and other service parts. It divided its automobile business into two partsAmericas and International. Americas part deals with the sale of Ford and Lincoln Mercury brand
vehicles in both North America and South America. The International part deals with the sale of ford
vehicles outside North America and South America. It sells its automotive components throughout the
world.
Vision of Ford: Build great products, strong business and a better world. It wants to become the Worlds
leading consumer company for automotive products and services .
Fords main focus has been to reduce costs to enjoy an advantageous position in terms of price of the cars
over its competitors. Using standardized parts for different models of ford cars and cutting costs has saved
more than a billion dollars for ford in the past years. It was also able to reduce inventory costs and the
number of inventory parts as well.
Reverse engineering was used in their products. Taurus is an example of reverse engineering. It examined
the parts of each car which best fitted the other competitor products. Since Taurus has the best parts
among its competitors, it was seen as the best car among that particular segment. This tactic helped ford
reach new heights above the other competitors.
Technology is also one of the strengths of Ford. It has been very aggressive in adopting new technologies
and is a leader in using Computer assisted manufacturing systems which leads to increased efficiency in
the auto industry. Another technology innovation is the use of online computer network. This network
will be used to share ideas online and create designs. Also integrated versions of the car can also be
prepared and tested by computer aided simulations.

Ford has also adopted Voip technology to reduce costs. Efficiency also improved because of shifting to
Voip. Fords truck facility is also fully operational and trucks are being shipped to dealers from there.
There is a flexible body shop, automatic material replenishment system, self adjusting platforms and
software driven systems which makes the processes very efficient. It is also spending huge amounts on
wireless infrastructure for inventory replenishment and vehicle tracking.
Ford is focusing on maintaining quality and reducing costs. It has been fairly successful in launching new
products frequently into the market. It has also been redesigning products to launch in the Asia pacific
region.
Bill Ford has a different outlook for the automobile world. While all other car manufacturers are trying to
focus on economies of scale, he wants to make huge profits by selling fewer cars.
In the recent times Ford has been facing difficulties in terms of number of vehicles sold. The global
economic conditions are hampering the growth of ford. It has been even said that only Ford financing
makes money while the Ford automobile is a loss making company.
Ford needs to spend significantly on advertising campaigns to attract the customers to buy Ford vehicles.
Also it needs to come up with products which suit to the lifestyles based on various geographies. Also it
needs to continue reducing costs in development of products.
Ford must keep in mind the preferences of the consumers before designing its products and then launch
these products in the market. The consumer wouldnt care to try the product unless it is made for him.
Utmost care must be taken in terms of appearance, price and performance. Enough surveys and testing
should be conducted on the product before launching the product to make sure that the product is
successful in the market after its launch.
Ford must start developing new ideas and be an innovative company rather than depend on reverse
engineering for developing their products. Depending on innovation will be an opportunity for Ford to
gain significant market share in the future. It also needs to diversify its portfolio by launching more and
more cars in competition to other products from various car manufacturers. Huge amounts are being
spent on designing and developing new products. So it needs to cover up these costs by communicating
the feature of the product correctly to the customers and make them realize that they need the car. If there
is no increase in the sales of the car, then it cannot meet its developmental costs which is detrimental to
the overall financial health of the company. Although the initial cost of innovation is very high, the
publicity of the innovation might help in increasing the sales. Also efficiency is increased. But if the
innovation fails, the company loses a large amount of money and has to switch back to the old ways of
doing things.
Hyundai Motors SWOT Analysis
Hyundai is one of the worlds largest car manufacturers and operates one of the worlds largest
manufacturing facility. Hyundai is also known for its quality . Its owners experience very few problems
than with any other care. Hyundais compact car, Santro is one of the best in the compact car segment.
Their car is a favorite in terms of content, layout, performance and other parameters. It also has a very
large sales network and trained sales personnel to achieve better distribution facilities and cater to the
consumers much better than any other car manufacturer.

One of the major weaknesses of Hyundai is the commodity price risks. Due to inflation, the prices of the
raw materials such as steel, aluminum, plastics etc. have increased which makes production costs higher
for Hyundai. Hyundai is trying to enter into long term contracts to counter these risks. Long term
contracts are very helpful when the commodity prices are very shaky and to ensure smooth flow of goods.
Exchange rate risk is yet another weakness for Hyundai because it exports a large amount of its
production to foreign countries and hence when there is fluctuation in the foreign exchange rate, the cash
flows vary a lot. Hyundai is trying to manage this by hedging according to the market conditions.
Hyundai is the market leader in terms of manufacturing and the growth. Operating profit margins are also
higher compared to other competitors. Hyundai also has the opportunity to diversify into US and EU
regions to counter business risks in the emerging countries although these are the markets which could
witness higher growth rates in the future.
The primary target segment of Hyundai is the middle to upper class professionals. These people look for
value for money which Hyundai provides. The secondary market is the college students and Hyundai
caters to the style and speed requirements of college students.
Hyundai has positioned itself as a value for money brand and focuses its marketing strategy on promoting
its brand as an economy car.
General Motors SWOT analysis
General Motors is one of the very few car manufacturers with a global presence and awareness which is
very important from todays competition perspective. It has operations in nearly 40 countries and its
vehicles are sold in more than 190 countries. Since it is present in a large number of countries it can
integrate its operations and concentrate on developing its core competencies. It is also focusing on
reducing costs by sharing them with its alliances or joint ventures. This is the strategy followed in most
European markets since small vehicles continue to dominate in these markets. General Motors is trying to
sustain its business in the European Markets by having joint ventures and alliances with other car
manufacturing companies which are relatively strong in the region. The problem with having such
alliances is that the profit margins become lower although the market share and brand visibility is
increasing.
General Motors is also very strong in terms of the sales it does in various parts of the world. It is also
trying to release hybrid cars to tap the future eco friendly fuel technology markets. General Motors also
spends a lot of money on advertising. It spends around 3 Billion USD on advertising in US alone. It has
followed a promotion strategy of providing its customers with internet coupons. This strategy has worked
very well in favor of the company. Gm comes up with very relevant innovation strategies which makes it
remain at the top of the industry. One other strength of General Motors is that it has been able to convert
its threats into opportunities every now and then. The threat of losing safety professionals due to
retirement has been converted into an opportunity by developing the recruitment program.
General Motors has also started using the E-business strategy and technology for different regions of the
world.
One of the major weaknesses of General Motors is that it had launched a price war 5 years ago which is
continuing even now. This has made the market share of General Motors to fall down. Another weakness

is that the General Motors plants in the United States have excess capacity while the demand is not that
much. There are also issues with the labor for wages in Germany. Another major weakness with general
Motors is the discontentment of the workers. General Motors has seen many strikes over the past years
which have led to significant losses to the company. It should take steps in this course to make sure that
this does not escalate in the future. Also General Motors has entered late into the Hybrid car segment
which might be a disadvantage to it. Although General Motors has increased the pace of innovation, it
still needs to do a lot to cope up with the competition.
General Motors is trying to change its strategy by concentrating on producing cars rather than trucks.
However it does not want to depend entirely on the production of cars but would also like to produce
trucks. It also plans to launch a product line dealing with compact pickups with more comfort and style.
General Motors can improve a lot in terms of employee satisfaction, innovation, expansion into emerging
markets etc. Managers and executives should review their policies to make sure that the employees adhere
to the rules and they should also make sure that the rules are fair and equitable. It should start giving
incentives to its employees like health care reimbursements, education for children etc. to make sure that
its image doesnt go down in the employees minds. Otherwise it will be very difficult to attract new
talent later.
Yet another area where General Motors needs to improve is the Innovation. General Motors leads in
Hydrogen fuel technology but lags behind in the hybrid automobiles. It should also consider the
preferences of the consumers and then invest in the Hydrogen fuel cell technology or Hybrid car segments
depending on the attractiveness of the segments. Inc ase it doesnt do this it becomes very difficult for
General Motors to compete with other car manufacturers like Honda, Hyundai, Toyota, Daimler etc.
General Motors has also recently started its retail store format which sells merchandise from miniature
models of cars, hats, T-shirts etc. It should also try to set up these kinds of stores in the emerging
countries to attract a large number of customers and ensure brand recognition. But before taking such a
decision it needs to identify proper locations where this can be done so that this doesnt become a failure.
It should also focus on advertising more than it is doing today to compete with other cars with increased
advertisement spending.

Internal Audit
Damiler- Benz SWOT Analysis
Daimler AG previously Daimler Chrysler is the number two automobile manufacturer in terms of
revenues. Many brands like Mercedes Benz, Dodge, Chrysler, Jeep etc. Come under the umbrella of
Daimler Chrysler. Hence it can be seen that Daimler AG has very strong brand presence and recognition
all over the world. Daimler AG also has its brands across different price ranges .Mercedes Benz is the
luxury car brand of Daimler, Jeep is the off road and SUV range of Daimler while Maybach is the super
luxury brand of Daimler AG and competes with rolls Royce and Bentley. It is one of the most innovative
car manufacturers known worldwide. The cars manufactured by Daimler AG cater to the consumers in a
very well defined way and satisfy them in terms of style, comfort and image.

The company has worldwide presence and is one of the premier quality car manufacturing companies. It
also has partnership with Mitsubishi which gives it market entry into the Asia region. This partnership
also allows for greater product visibility and sharing of technology between the two companies.
Daimler is a leader in the alternative fuel cell technology which is considered to be the next generation
technology for automobiles. Daimler Ag spends significant amount of revenues on Research and
Development which can make it remain at the top of the list for years to come.
Although there are many strengths to Daimler AGs profile, there are weaknesses too that can arise from
the external economy. It is very much essential to have revenues from different parts of the world rather
than have all the revenues from only a few regions to diversify risk. Daimler AG is very strong in the
European and US markets but doesnt have a significant presence in the Asian regions. It doesnt have
brands which occupy significant market share in the Chinese and Japanese regions. Although it came up
with a partnership with Mitsubishi it didnt work out that well because of the fall in market share of
Mitsubishi.
Brands of Daimler are very weak in the Asian regions and also had very limited success in other regions.
The Mercedes Benz brand is the best known brand of Daimler AG. But since it is a luxury brand it has
limitations in terms of economies of scale and so cannot be marketed in the Asian regions. The Jeep brand
is also well known but it appeals only to the off road buyers.
Hybrid vehicles may also pose a significant threat to Daimler AG as they might beat the Hydrogen fuel
cell technology developed by Daimler AG. Many car manufacturers are developing hybrid technology
which if successful will leave the company lagging behind. Also most of the companies are planning to
launch their famous brands in the hybrid versions while that is not the case with Daimler AG. Daimler
could lose a large chunk of their market share in case hydrogen fuel cell technology doesnt gain
popularity in the next few years.
Daimler also merged with Chrysler which is generally seen as a acquisition rather than a merger. Many
believed that this might lead to losing the innovation tag of Chrysler. Also most of the operations have
been shifted to Germany where wage rates and costs are higher. It became difficult for Daimler Chrysler
to cut costs.
With the changing environment Daimler has a huge number of opportunities to leverage on its strengths
and to fix its weaknesses. China has the fastest growing automobile market in the world and Daimler
could exploit this opportunity by expanding into the Chinese areas. The jeep brand of Daimler might just
do the trick as there is increasing popularity for SUV segment in the Asian region. It can also build
partnerships with other local brands to build manufacturing plants in Beijing. Hence by building new
plants it can push its products to the largest consumer base of the world.
Assuming that the oil prices go up in the future, the concept of hydrogen fuel cells can work out wonders
for the company. The high prices might help in leading the company to invest more in R&D for
alternative fuel technology. High prices will also lead to government promoting various clean energy
initiatives which might be beneficial for the company.
One of the major threats being faced by Daimler is its shaky partnership with Mitsubishi. The recession
has badly affected the condition of Daimler. It is very difficult to establish its presence in the Asian
markets without significant partnerships and investments which at this point of time is very difficult.
Mitsubishi is also badly affected by the recession and its partnership might actually bring about the

downfall of Daimler as well in the future.

Another great threat is the investments made by Daimler in the Hydrogen fuel cell technology. If the
hybrid engine technology becomes successful it poses a significant threat as it might lose market share in
the hybrid fuel technology segment. The worst thing which can happen is that hydrogen might not be a
viable form of energy source in the future. All its investments in Hydrogen fuel cell technology might
become sunk costs.
Daimler has a four pillar strategy Strong Brands, Global Presence, Broad product range and Technology
leadership. It depends upon these four pillars to make it a world wide well known brand.

Recommended Strategy
Base on the past strategies and the future outlook, strategy can be formulated for Mercedes benz. The
process followed is as follows. Firstlt the organizational inputs like capital, labor, organizational skills,
technology and other goals are identified to maximize the value for the stakeholders. Then the enterprise
profile is prepared, the orientation of the top managers is clarified, major objectives of the firm are
determined, present and future external environment are identified, resource audits are prepared to cater to
the companys weaknesses and threats, alternative strategies are developed, strategies are evaluated,
tested and contingency plans are prepared.
TOWS matrix can be used for developing the strategies that integrate the threats and opportunities with
the weaknesses and strengths of the firm.

External Opportunities
1. Growing luxury car
market
2. Eastern Europe and
Asian Markets
3. Technology
External Threats
1. Loss of Defense sales
2. Competition from BMW,

Internal Strengths
1. Cash
2. Brand Image- Luxury
3. Styles & Models
4. Close locations to
suppliers
5. High technology
Strength Opportunity Strategy
1. New Models and
premium pricing
2. Increase production
3. Acquire other companies
Strength Threat Strategy
1. Move out from defense
business and convert into

Internal Weaknesses
1. Costs
2. Diluted brand
3. Bureaucratic
4. Only past successes
5. Weak position in Asian
Markets
Weakness Opportunity Strategy
1. Flexible manufacturing
systems usage
2. Reduce costs
3. Manufacture parts in low
cost locations
Weakness- Threat Strategy
1. Retrenchment in
locations where there are

Audi
3. Emissions regulations
4. Political issues in
manufacturing locations
like South Africa

normal sales
2. Develop better models

political issues
2. Strategic alliances in
Asian Markets

Alternative Strategies for Daimler Benz

The external and internal environments are studied in detail and the following strategies can be
implemented based on the need of the firm. The following are the 4 strategies that can suit Mercedes
which are developed based on the TOWS matrix presented above.
1) The Strength-Opportunity strategy maximizes both the strengths and weaknesses.
2) The Strength-Threats strategy tries to maximize the strengths and minimize the threats.
3) The Weakness Opportunity strategy is to minimize the weaknesses and leverage upon opportunities.
This is a developmental strategy in which companies try to transform weaknesses into strengths.
4) The Weakness-Threat strategy minimizes weaknesses and threats.
S-O Strategy :
The best SO strategy for Benz is to come up with new cars and better models. It should launch more and
more cars into the market using its prowess in technology and world class engineering capabilities. It can
also charge premium prices based on its luxury brand image. Customers will be more than willing to
purchase the brand to cater to their aspirations. Also with the increase in disposable income, consumers
look for high end cars which others look upto. Also the demand for luxury cars is known in the European
and US markets. This is being spread to the Asian Markets as well. Fuel efficient and better safety models
can be launched into the market and the proximity to well known suppliers can be leveraged upon.
Also some policies of the federal government in Germany fosters investments in companies in East
Germany. Daimler-Mercedes can acquire such companies to gain cost advantages and also cater to the
social objectives. It can also invest in auto components which do not require high R&D interactions. This
stands out as an advantage to counter the larger distances between Mercedes and its suppliers.
The SO strategy also helps to counter the threats from the competitors in the automotive sector in
different parts of the world. It can maintain its position through innovative products compared to different
brands like BMW, Lexus, Jaguar etc. Also rapid development will lead to sustained edge over the
competitors in the Asian regions as well.
S-T strategy
This strategy counters the threats to the firm by using its strengths. Daimler is seeing a decline in the sales
of its vehicles to Defense/Government. Hence the company should use its technology used so far in

defense vehicles to develop new products for the consumers. It can also use its prowess in the aerospace
projects by shifting more and more resources to this particular segment from the Defense segment.
W-O strategy
Investments in flexible manufacturing systems can subside the high labor costs to some extent. Also by
setting up some manufacturing plants in Eastern Europe region and Asian regions Mercedes Benz can
significantly reduce manufacturing and labor costs because of cheap labor and raw materials there. It has
also got the resources necessary to acquire any company present in these areas to boost its presence and
have a cost advantage.
Also reorganization of the organizational structure can be done to overcome its bureaucratic structure.
This will result in better responsiveness and accountability by which the customers can be served better.
Centralized R&D also leads to cost reductions.

W-T Strategy
Daimler can withdraw from locations where there is political turmoil. The major problem area is South
Africa from which it can withdraw. It can also have co-operative agreements with local players like
Mitsubishi in the Asian regions which it is currently doing. The cost of setting up dealerships and
distribution comes down drastically because of such alliances.
Hence Daimler can pursue a combination of strategies based on the TOWS matrix prepared.

CONCLUSION

Daimler- Mercedes Benz has to make some strategic changes to be sustainable in the future. It changed its
mission from being an automotive company to an integrated transporting company, defense contractor
and appliance manufacturer. As seen earlier four strategies have been developed based on the TOWS
matrix which can be used to select a strategy which best fits the current scenario. These choices have to
be made inspite of the risks involved to remain competitive in the industry and to retain market share if
not gain market share. Daimler has to come up with a shorter developmental cycle in order to remain
competitive. It should try to reinvigorate its culture and come up with products which cater to the
customers needs better than the competitors.

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